The Moderating Effect of Board Director Diversity on the Relationship between Ownership Structure and Firm Performance: Evidence from Jordan

This study examines the moderating effect of board director diversity on the relationship between ownership structure and firm performance in Jordanian-listed companies. Analyzing 158 firms listed on the Amman Stock Exchange from 2015 to 2021, we investigate how institutional, government, foreign, and concentrated ownership impact firm performance, measured by Return on Assets (ROA) and Tobin's Q, and how board diversity moderates these relationships. Using the Generalized Method of Moments (GMM) estimation to address endogeneity, our findings reveal complex interactions between ownership structures, board diversity, and firm performance. Ownership concentration and foreign ownership consistently show positive effects on both ROA and Tobin's Q, suggesting their potential to mitigate agency problems and introduce valuable international practices. Government ownership positively impacts ROA but not Tobin's Q, highlighting the nuanced role of state ownership in emerging markets. Institutional ownership positively affects Tobin's Q but not ROA, indicating its influence on market perceptions rather than operational performance. Board diversity emerges as a crucial moderating factor, positively moderating the relationship between foreign ownership and both performance measures, suggesting that diverse boards can enhance the benefits of foreign investment. Similarly, board diversity strengthens the positive impact of institutional ownership on ROA, indicating a complementary effect between diverse boards and institutional monitoring. These findings contribute to understanding corporate governance dynamics in emerging markets, with significant implications for policymakers, corporate leaders, and researchers. They underscore the need for nuanced corporate governance regulations that consider complex interactions between ownership structures and board composition, providing empirical support for initiatives promoting board diversity in emerging markets. While the focus on Jordanian-listed companies limits generalizability, future research could extend this analysis to other emerging markets, conduct cross-country comparisons, or explore individual components of board diversity for more granular insights.